AlphaKing.com Portfolios FAQ:
Q: Is it possible to get Porfolio Archives prior to March 06? I would like to see the performance of your hedge fund portfolio in 04 and 05.
A: We provided our updates via email newsletter format prior to March of this year, and we are no longer partnered with our newsletter distributor, thus archives prior are unavailable to us for publication. Returns for the GrQ/8 Hedge portfolio Long/Short are as follows: 1999 +21.5 2000 +58% 2001 +88.3% 2002 + 8.9% 2003 +66.8% 2004 -11.2% 2005 -1.6% Please note that we used to let each position do its own thing prior to the end of 2005, when we ran some tests that proved conclusively that exiting and reversing positions on stock market trend changes was the way to go, thus returns would be expected to be higher.
Q: What were your index system's annual returns? And, the long/short trades?
A: The Index results since 1973 are:
Long only (excludes interest while in money market funds):
-1.5, -5.9, 19, 15.5, -0.8, 16, 20.7, 30.3, 4.1, 27.1, 29.6, -8.3, 32.2, 14, 11.8, 2, 19.9, 2.9, 48.8, 17, 1.4, -2, 30.8, 8.9, 22.2, 33, 62.8, -9.3, 4.4, -5.6, 47.1, 7.3, 9.6 (annual average rate of change 15.5%.)
Long/Short (exludes interest while short:)
7.5, 17.4, 19, 15.6, -9.2, 18.9, 20.7, 30.3, 10.8, 40, 29.6, -8.3, 33.2, 20.8, 11.8, 2, 20.6, 29.6, 48.8, 17, -11, -1.9, 30.8, 8.9, 22.4, 47.8, 62.8, 25.2, 62.5, 18.1, 47.1, -2, -1.6 (annual average rate of change 21.5%)
We do not have individual trades of Q/8 or Q/25 stored anywhere easy to publish. We are now tracking such stats, but only since we went live on a website based system, starting in March 2006. The q/25 trades are also tracked by Marketocracy.com, though they have yet to put a system in place to easily see these trades in print.
Q: Do you only use the Nasdaq for your market calls? Why not use the Russell 2000 for your Small Cap Portfolio?
A: Testing was done using NAZ link, which proved to work the best. NAZ leads at turning points, especially semi-conductor sector. All stocks exit on sell signals, and reenter on buy signals, though one in each stock trades independent of the market, thus can flip into sell mode, and flip back into buy mode.
Q: Why do you trade your stocks all at once?
A: The last step in the AK Research Project Article over in the Tours section explains why, and improved results from linking stocks to the market, versus letting them do their own thing. When the AK Indicator is in buy mode, stocks are sold when they trigger sell signals based on the AK stock indicator.
Q: What is the AK 100 and can it be traded?
A: The AK 100 is a combination of 4 winning portfolios tracked in the massive AlphaKing Research Project. We plan to use this diversfied portfolio in a hedge fund we hope to open sometime in the future.
Q: What is the average drawdown from the high in your sell signals?
A: We don't know the answer to the draw-downs from the high. All tests are run on money in the bank after the trade is closed, versus all other methods. We have done a ton of work on trying to lock in profits sooner via tighter signals and they make less money over time than our current approach.
A glance at the arrows on the charts of stocks shows that sometimes the AK system sells too soon, sometimes too late, and sometimes spot on. The current set up makes more money than all other trading methods.
Our system works on buying portfolios of great stocks when the stock market flips into buy mode, with the view of trying to hold onto them until the next sell signal, while letting winners run, while cutting losses on the weaker stocks quicker.
There are 3.1 new buys for the stock market each year, on average.
We are simply focused now on selling when we need to sell - adding shorts for the portfolios that trade short during the sell signal - and letting the stock market do its thing until the next buy signal. Then we'll load up long again. And repeat. And repeat.
I can say with some confidence that a drop of a certain percentage from a peak will be a great ENTRY opportunity only if the stock market moves to new highs after purchase, while the same drop for the stock will be a great EXIT signal if the stock market flips into and stays in sell mode.
Since one never knows which dip is which, all we can do is run tests on all dips, and all rallies, to see which set of indicators make the most money with the least volatility overall.
Q: Why do you sometimes buy stocks for your portfolio that gave buy signals beforehand?
A: When we need a new buy, we look at all great AK companies who are in buy mode that have the overall technical look we seek, and then triple check everything.
The company's fundamentals, overall chart pattern, and overall technical look as of today, scores much higher in our opinion than when the new buy signal was issued.
Q: How do you decide which stocks to buy in your portfolios?
A: The alphaking system uses both fundamental and technical analysis, for our research shows that both are equally important. Only 10% of stocks in the stock market have all the fundamental elements required to be labeled an Alphaking (and we only buy those stocks meeting the full criteria in our portfolios.) Being labeled an AlphaKing stock is our systems fundamental seal of approval.
Next we look at the overall chart pattern from a longer term perspective, since our research shows some patterns have more outperformance power than others. Then we look at the shorter term pattern to make sure the new buy has the perfect or near-perfect technical set-up to warrant a buy that day.
So we seek stocks that have great fundamentals, have a great longer term chart, have great technical action in the shorter term, and the best of those will be bought so long as the stock market is in buy mode and acting well. For an example, read our Newsletter from 4-2-09 in the Archives: http://alphaking.com/portfolios/archive/?id=793
Q: I recently subscribed. Is it too late to buy your stocks? What if we are near a sell signal?
A: You ask a very important, and very difficult question. I can say that we are ourselves face this dilemma 3 times per year on average, which is the number of times the stock market gives new buy signals. (Some years such as 1995 and 2003 never give a sell signal, but those are rare.)
So each time we put our entire portfolio long we face the possibility that the buy signal would prove a failure, and that we will lose some money as the sell signal soon emerges. All we can do is to keep taking such hopefully modest haircuts so that we can enjoy the larger gains when the stock market delivers on a buy signal.
Avoiding those stocks in our portfolios that have gone down more than 5%, and those that have gone up more than 15%, should ensure that any entry is close to our optimum buy point.
No one knows when the next stock market sell signal will come. The most important element of everything we cover is the trading stance of the Alphaking Trading Indicator. We can feel bearish as heck, and pretty darn sure the stock market will fall, and we are still going to be invested long while-ever that indicator tells us to. It is a trend-following indicator, and does not forecast what will happen. we designed that indicator to tell us what to do to weed out the noise of everything else.
Take a peek at the trading profile of the NASDAQ index in the Charts page to get a glimse of expectations, espeically in regards to past hit rate, and average profit on wins versus what is lost on failed signals. (That last part is where our system aims to outpeform, rather than any forecasting miracle.)
The Index portfolio will trade short when the Alphaking Trading Indicator flips into sell mode (with 401K and long-only investors moving into a money market fund.)
The GrQ/8 Hedge fund portfolio will take some short positions.
The GrQ/25 small cap portfolio is long only, and will sit out sell signals in cash.
Shorting is way tougher than trading long. Most people should trade long only. Our research does show that trading short can make money, though it's a lot more volatile ride.
Q: I can't buy all 37 stocks and etf's, plus the index etf. What should I do?
A: Investors and traders may do what they want with the information we provide. Newer subscribers may want to look at the stocks that have risen less than 15% since purchase, and those that have fallen less than 5%, thus remain near the prime buy position. All have great fundamentals, so it is difficult to use that as a deciding mechanism.
The GrQ/8 is perhaps the best portfolio for those looking to use a more concentrated approach, with the GrQ/25 better for those looking for more diversification. FolioFN offers many advantages to those trading larger portfolios, though that is entirely up to the individual. No one has to decide today. AlphaKing was designed to outperform over the long term.
Q: Why don't you use stop orders?
A: Stops don't work, though technical trend-following triggers do.
Think about it thusly, you enter a stock trade with about a 50-50 chance of making a profit. If you set a stop, then maybe 1/2 of your would-be winners will be stopped out, along with the other 1/2 that were destined to be failed trades. That leaves a 25% hit rate, and that is tough to overcome.
Technical trend following triggers, on the other hand, also work 50% of the time, with zippo reduction for anything other than what the trend following signal is destined to deliver on over time.
In testing, these technical trend-following triggers have approximately a 10% average loss on the failed trades, though any one trade can be significantly higher.
You can see this at work by pulling up charts on the main chart page, and looking at the average loss, then take a peek down the full trade list. Diversification helps smooth some of those larger than would like to see drops.
Traders and investors can set stops with any of our positions if they like. If a position does trigger an exit signal after puirchase, it will be replaced with another pick if the stock market trend remains in place. We use the Alphaking Trading indicator - for the stock in question - to trigger exits in our positions once entered.
Q: I only invest in my 401k and IRA accounts. I never buy stocks. Can you help me?
A: Certainly! Our stock market buy signals can be used to move into mutual funds or exhange traded funds (ETFs) in retirement accounts, and money market funds when in sell mode. Tests show you'll make more money in the long run this way, with less risk, because you'll be in cash (money markets) when markets are in sell mode.
Q: How did your GrQ/8 long & short portfolio perform each year from 2001-05? I really like your system, but want to see how it did in the tough years of 2001, 2002.
A: GrQ/8...long only...long/short
1999....+21.5%....+21.5% 2000....+10.2%....+58% 2001....+8%.......+88.3% 2002....-1.2%.....+8.9% 2003....+63.3%....+66.8% 2004....-8.2%.....-11.2% 2005....+9.6%.....-1.6%
Note before the end of 2005 we used to allow each stock to stay in the portfolio once selected until it triggered a sell signal in the stock itself, with no adjustments made for the action of the stock market.
We ran some major tests in late 2005 that proved beyond a doubt that it was better to exit all positions on a stock market reversal signal, rather than letting the stock do its own thing. Thus, returns would have been even better with that market-linked change.
Past performance is obviously no guarantee of future succes, though we remain very optimistic that we can continue to outperform going forward over the long term.
Q: After a few years, I have decided that daytrading is not for me. It seems the real money is made by sitting.
A: That's exactly what we found, with the big money made trading intermediate term rallies. We use a trend following approach, since it beats contrarian overbought/oversold moves.
There are 3 type of trading ranges that can occur each year. The stock market can enjoy a terrific rally year that ends well (1995, 1999, 2003,) or the stock market can have a miserable period of downside action (1987, 1990, 1998, 2000, 2001, 2002,) or the stock market neither goes up much or down much (1988, 1994, 2004, 2005, 2006.)
Our system was designed to make a killing during the major rally years, signficantly outperform during the really big decline years, while performing reasonably well during the sideways churn.
This system was designed for the long term, and we rarely expect trading to be easy, though we do believe that we will make significant and lasting returns over the long term. No guarantees, but we are exactly where we want to be, and are committed to making money both for ourselves and for our subscribers.
The stock market is a tough business, and we believe the AK system is equally tough and robust. I use this approach in my own personal investing, both trading index mutual funds in my retirement account, and via AK stock portfolios traded at FolioFn.
More conservative investors may simply want to buy index mutal funds and ETFs using our Index Portfolio approach, while those looking to also trade individual stocks may find our GrQ portfolio picks helpful.
Q: How do you use Elliott Wave Theory in conjunction with the AlphaKing System?
A: Trading-wise, I use the trend-following AlphaKing System, because it offers success without the pain of ever being dead wrong, which is a big flaw of Elliott Wave, and of other ways of trading. Our indicators best fit the Elliott Wave patterns, which is why I use them to help me decide which pattern I'm trading. Then I use intra-signal swings to add or reduce leverage using the EW pattern of expectation.
Results are tabulated using the opening price the day following a new trading signal, and exclude commissions, dividends, or interest paid on cash balances during sell periods. Stock prices highlighted in blue are temporary - using the end of day quote the day a new buy or sell signal is generated - with the final price adjusted the following trading day when the opening price is available. Past performance is no guarantee of future success
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